Netflix Valuation Slides as Warner Bros. Deal and Earnings Rattle Investors

2026-01-21 companies

Los Gatos, Wednesday, 21 January 2026.
Despite beating Q4 revenue estimates, Netflix shares plummeted 40% from highs, driven by investor skepticism over its revised $83 billion all-cash bid for Warner Bros. Discovery.

Market Reaction and Merger Strategy

As markets opened on Wednesday, January 21, 2026, Netflix stock traded at $84.07, representing a decline of 3.66% for the day [7]. This downward pressure persists despite the company reporting fourth-quarter earnings of $0.56 per share on January 20, with revenue reaching $12.05 billion against analyst estimates of $11.97 billion [2]. While the financial results technically surpassed expectations, investor attention has been aggressively diverted by the company’s strategic pivot regarding merger and acquisition activity [4]. On January 20, Netflix revised its acquisition offer for Warner Bros. Discovery to an all-cash deal valued at $83 billion, translating to $27.75 per share [5]. This massive capital commitment has forced the company to pause its share buyback program, a move that fundamentally alters the investment thesis for shareholders accustomed to capital returns [1].

Wall Street Reassesses Valuation

In response to these developments, major financial institutions have swiftly adjusted their price targets while maintaining cautious optimism. On January 21, UBS maintained its ‘Strong Buy’ rating but slashed its price target from $150 to $130, while Canaccord Genuity lowered its target from $153 to $125 [7]. Similarly, BMO Capital adjusted its expectation from $143 down to $135 [7]. These adjustments reflect a broader hesitation, with Morningstar analyst Matthew Dolgin noting on January 20 that Netflix remains ‘overvalued at these levels’ despite the recent correction [2]. Since the initial interest in Warner Bros. Discovery assets was announced on December 5, 2025, Netflix shares have fallen 15%, breaking key support levels established during its uptrend since June 2022 [5].

2026 Financial Outlook

Looking ahead, Netflix management projects robust growth for the fiscal year 2026. The company expects revenue to fall between $50.7 billion and $51.7 billion, representing a year-over-year increase of 12% to 14% [1]. Additionally, the streaming giant is targeting an operating margin of 31.5%, which would drive operating income to approximately $16.1 billion—a 21% increase from 2025 levels [1]. Based on these forecasts, the company is on track for roughly $3 in earnings per share in 2026, placing its forward price-to-earnings ratio at 28 [1]. Despite the volatility, the consensus among 33 analysts remains a ‘Buy,’ with an average price target of $121.89, implying a potential upside of 44.986% from the January 21 trading price [7].

Sources

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